Your First Home swaps a deposit problem for a borrowing problem, Tembo finds
Lower earners buying with a 2.5% deposit would still need to borrow more than 4.5x their income in most English cities, even with a 20% government equity loan
- Tembo analysis finds that Your First Home would cut the time to save a deposit from almost three years to 18 months
- But, lower earners would still need to borrow more than 4.5x their income in 76% of the cities analysed, and as high as 9.9x in London
- Even median earners could need to borrow more than 4.5x their income in almost half the cities analysed
- In addition to its analysis of Your First Home, Tembo's Q3 First-Time Buyer Index also finds the average first-time buyer is now 34, up from 31 a year ago
- Glasgow tops Tembo's City Index for the third quarter running, while London remains the hardest place to buy
- Buyers in Bristol are almost £111,000 better off after five years than if they'd kept renting, but in London they're £4,514 worse off
LONDON, Oct. 20, 2026 /PRNewswire/ -- Your First Home could remain out of reach for lower earners in three-quarters of English cities analysed, despite its 2.5% deposit, according to new analysis from Tembo, the award-winning digital savings and mortgage platform.
Tembo's Q3 2026 First-Time Buyer Index modelled the scheme, announced by the Prime Minister in September, across 17 English cities. Under Your First Home, eligible first-time buyers will be able to buy participating new-build homes with a 2.5% deposit, supported by a 20% government equity loan, leaving 77.5% of the price to be covered by a mortgage.*
The deposit barrier falls, but the borrowing barrier remains
The scheme would make saving a deposit significantly quicker. Across the 17 cities, the typical time to save falls from 34 months for a standard 5% deposit to 18 months under Your First Home, cutting more than a year off the wait. The biggest reductions would be for buyers in London (40 months) and Brighton (32 months).
But the analysis suggests the challenge then dramatically shifts from saving enough to borrowing enough.
Buyers earning at the lower end of local salaries (the 25th percentile) would need a mortgage of more than 4.5 times their income to buy an average new-build in 13 of the 17 cities. Even those on the median local salary would exceed that threshold in eight cities, and higher earners (75th percentile) in four.
In London, a lower earner would need to borrow 9.9 times their salary. In Leeds the figure is 8.7 times, in Newcastle 8.4 times and in Leicester 8.2 times. Only four cities - Birmingham, Stoke-on-Trent, Liverpool and Southampton - keep lower earners below the 4.5x threshold.
That matters because, while lenders can offer mortgages above 4.5 times income, options are restricted - especially for buyers with small deposits. And because additional financial commitments such as service charges are excluded from the calculations, the true affordability challenge will be greater still for those buying leasehold new-builds. The smaller deposit also leaves buyers with a thinner equity cushion of house prices fall.
New-build-only rule hits some of England's most affordable cities hardest
Because Your First Home is restricted to new-builds, buyers will be shopping in a distinct but often more expensive segment of the market. Across the 17 cities, the average first-time buyer new-build costs £236,750, which is £9,809 (4.3%) more than the average first-time buyer home. In 10 of the 17 cities, new-builds are more expensive.
The gap is starkest in cities that are otherwise among the most affordable in the country. Newcastle and Leeds are among the hardest hit coming in 4th and 6th in Tembo's First-Time Buyer City Index, yet the modelled Your First Home purchase price is 67% (£121,311) higher than the average first-time buyer home in Newcastle, and 50% (£108,393) higher in Leeds. Bradford (+52%), Derby (+45%) and Hull (+45%) show similarly wide gaps.
As a result, the scheme's deposit benefit is weakest where new-builds are the most expensive. Compared with a standard 5% deposit, buyers would save just five months faster in Newcastle, six in Hull, and seven in Bradford and Derby.
Your First Home could also push prices higher. The government's own evaluation of Help to Buy found that homes bought through that scheme were 0.9% more expensive than comparable new-builds. If Your First Home has a similar effect, it would add around £2,100 to the price of the average first-time buyer new-build.
Richard Dana, CEO and Founder of Tembo, said:
"For anyone who has spent years struggling to save, a 2.5% deposit sounds like a game-changer, and our analysis shows Your First Home could cut more than a year off the time it takes. But a smaller deposit is only one part of the equation. In three-quarters of the cities we analysed, lower earners would still need to borrow well beyond 4.5 times their income, where lending options become far more limited. The challenge simply shifts from saving enough to borrowing enough.
"This quarter, our first-time buyers were older and wealthier than ever, with the average age at mortgage application rising to 34, from 31 just a year ago. That raises a trickier question: are younger and lower-earning buyers being pushed further out of the market? If Your First Home is going to genuinely broaden access to homeownership, rather than mainly boosting the buying power of those who can already secure substantial mortgages, it has to tackle the borrowing barrier as well as the deposit one."
"We would encourage the government to build on the ambition behind Your First Home, and address the affordability challenge faced by the very people the scheme is targeting. In addition, to consider how small changes to first-time buyer Stamp Duty relief and the existing Lifetime ISA could make existing support more equitable, helping average buyers in the most challenging cities in the UK to become a homeowner."
Also in Tembo's Q3 First-Time Buyer Index
- First-time buyers are older than ever: the average age at mortgage application rose to 34, up from 33 last quarter and 31 a year ago.
- Mortgage rates fell from 4.96% to 4.81%, bringing average repayments down to 27.7% of take-home pay (from 29.7%) and lifting average borrowing power from £220,063 to £226,560.
- But the barrier to entry rose: the average first-time buyer purchase price reached £273,217 (from £265,242) and average deposits £46,711 (from £45,356). Tembo's Attractiveness Score slipped one point to 597.
- Glasgow tops the City Index for the third consecutive quarter, followed by Belfast and Liverpool. London remains the hardest city for first-time buyers, with prices nearly nine times local earnings, followed by Brighton and Leicester.
- This would mean that the average buyer in London is £4,514 worse off after 5-years than if they had continued renting.
- Bristol offers the biggest five-year financial advantage of buying over renting, at almost £111,000. Coventry was the biggest riser, climbing eight places to 7th.
Notes to editors
*The Your First Home analysis is illustrative. Final scheme details are yet to be confirmed, and the modelling is intended to show the scheme's potential impact rather than predict individual outcomes, which will vary by personal circumstances.
Data collected from Tembo first-time buyers in Q3 2026.
To see the full Q3 First-Time Buyer Index, download by clicking here. Their report hub page here will be updated when the embargo lifts.
About Tembo
Tembo is an award-winning digital savings and mortgage platform, helping people save for, buy and refinance their homes. Backed by Aviva, Tembo combines technology with expert advice to help first-time buyers get onto the property ladder sooner. Tembo has been voted the UK's Best Mortgage Broker by customers at the British Bank Awards for five consecutive years (2022-2026), and the Tembo Lifetime ISA was named Best Lifetime ISA at the Good Money Guide Awards 2023.
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